TSP notes: TSP Roth launch 'on time'

By
Jack Moore

Providing an update of the most recent meeting of the Federal Retirement Thrift Investment Board, Tom Trabucco, the board's director of external affairs, said the Roth Thrift Savings Plan option is "on time," for a launch later this year.

"Roth continues to be on time and we will begin sending out materials ... along with the 2011 participant statements to all 4.5 million participants to let them know what to expect from Roth," he told In Depth with Francis Rose.

The Roth plan, which the board has been planning since 2009, will allow federal employees to invest already taxed income so it can be withdrawn without being taxed again. The original launch date was January 2012, which was delayed last year.

TSP officials said last year the plan was back on track to launch by the second quarter of this year.

Returns and participation

Participation in the TSP in 2011 continued to grow, Trabucco said. It took in $25 billion in new contributions last year, alone, he added.

However, the participation rate for FERS employees dropped from 85.2 percent to 84.6 percent. Trabucco said the decline can be explained by three factors: an increase in the number of separations, an increase in the number of employees who reached their contribution limits and "a little nick up" in the number of employees opting out of FERS — from 2.7 percent to 2.8 percent.

However, Trabucco said the increase in the number of employees contributing the maximum amount to the TSP in 2011 is attention-grabbing.

In 2010 there were 189,392 TSP participants who contributed the maximum amount allowed — $16,500. In 2011, 205,113 people contributed the maximum amount.

"People are continuing to push ... And they're looking to their future and their future retirement security, and that's a good thing," Trabucco said.

Three-legged stool

Federal employees' retirement rests on a three-legged stool: Social Security, their pension and the Thrift Savings Plan savings, Trabucco explained.

While many federal employees may think the current three-tiered structure has been around since time immemorial, it has a relatively short existence.

The Federal Employee Retirement System was only enacted in 1986 Trabucco said. Before that feds were covered by the Civil Service Retirement System, which meant they were not covered at all by Social Security.

CSRS was a "full retirement system," Trabucco said, which predated social security and "provided an adequate level of benefits for everyone."

However, he said, it did not include the "other insurance aspects" that Social Security provides, particularly for federal employees in lower grades.

"This switch actually broadened the benefits that people get from their employment with the federal government," he said.

Ballpark estimate

Trabucco also discussed the retirement-savings calculator, operated by the Office of Personnel Management. It allows federal employees to estimate how much they should be saving. The calculator provides a "ballpark estimate" to provide employees with more concrete information and stop guessing.